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Marvell’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average positive surprise of 2.02%. In the last reported quarter, the company delivered a positive earnings surprise of 0.15%.

For the upcoming quarterly results, the company expects revenues in the range $940-$960 million and earnings per share between 35 cents and 39 cents. The Zacks Consensus Estimate for revenues and earnings is pegged at $615.51 million and 34 cents, indicating a year-over-year increase of 1.78% and 13.33%, respectively.

Marvell is benefiting from growing demand for SSD products. This is evident from the company’s fiscal 2018 revenues from the storage end market, which accounted for more than 50% of total revenues.

Storage revenues were positively impacted by strong demand from SSD customers along with elevated demand from enterprise and data-center operators. This trend is expected to continue into the to-be-reported quarter.

Moreover, management is optimistic about the first-ever NVMe SSD chipset meant to address the requirements of new-age cloud and enterprise data center applications. The Zacks Consensus Estimate for revenues from Marvell’s Storage Products business is pegged at $326 million, indicating an increase of 4.5% from the year-ago quarter.

Marvell’s core switch, PHY and processor solutions are expected to continue its uptrend in the to-be-reported quarter. The company’s automotive Ethernet business is also gaining traction.

Moreover, improving product mix and other margin expansion initiatives are tailwinds. Management expects the gross margin to reach 63-63% in the quarter. The company also expects to reach non-GAAP operating margin of 30% in the fiscal second quarter, six quarters earlier than anticipated initially. This makes us optimistic about the upcoming quarterly results.

However, the company expects to incur a loss of about $7 million in ZTE networking revenues owing to the trade restrictions imposed by the U.S. government. This is expected to partially offset the year-over-year revenue growth expected by the company.

Moreover, Marvell also expects Connectivity revenues to fall, as it is not well-versed with the consumer gaming ramp, which started in the quarter. The Zacks Consensus Estimate for revenues from this segment of the business is pegged at $84 million, indicating a fall of 15.15% from the year-ago quarter.

What the Zacks Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Marvell currently carries a Zacks Rank #3, with an Earnings ESP of +0.15%.

Other Stocks With Favorable Combination

Here are few other stocks, which, per our model, have the right combination of elements to post an earnings beat this quarter:

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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

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